Common sense for an uncommon world.

Where the Smart Money Lies

As anyone who has experienced debt knows, it’s not getting the money that’s the biggest problem – it’s paying it back. And while the latest Liberal campaign promise of more money to students hasn’t missed the boat totally, it is standing on the wrong dock, and runs the risk of more students drowning in debt.

The Liberal platform is designed to make more money available for all, but be weighted so those students most in need will have access to a greater share of the funds. Sounds good in principle, but when it comes time to pay the piper what happens? It’s not enough to promise students money without giving them a clear way to repay the loans once they’ve completed their education.

What you end up with is defaulted loans, destroyed credit ratings, undue stress, and countless dollars lost on a noble cause.

So what’s the right solution? Increasing student loan accessibility is a good start, but it needs to be complemented with an income-contingent loan repayment program. ICLRPs have been a mantra for years for certain student groups and governance organizations because they simply make sense.

It’s not just important to gauge the need of the student before they start school – we also need to assess their situations once they’ve graduated and entered the work force. Let’s face it, a university degree is simply not a guarantee of a higher-paying job. Yes, it may open more doors and it may broaden the spectrum of opportunity, but the fact of the matter is that there are people with university degrees working low-paying jobs – or who find themselves out of work.

By adjusting the rate of repayment to their level of income you allow students the security of pursuing higher education without the fear of being strangled by the threat of debt repayment. And, with a repayment schedule developed around your income at any given point in your career, there is less chance of default. A loan payment geared towards your actual income is much more realistic and tolerable than a set payment regardless of income. For some that may work, but for others it can be an obstacle that prevents them from attending post-secondary education in the first place.

Obviously a switch to income-contingent loans would require an increase in the overhead costs due to the fact that there would be more management. But loan issuers would be able to recoup those extra expenditures with the fact that there would be fewer defaults on existing loans. Much of the money that goes to collection agents could be reassigned to staff that works with the student to match their loan repayments to their after-school income.

The goal of any student loan program is to offer the opportunity to pursue higher education to those whose educational dreams and potential may exceed their financial means. However, there are those who have the desire, ability, and inclination to pursue post-secondary education, but are reluctant to do so due to the financial considerations. An income-contingent program eliminates that roadblock because the potential student is aware before the fact that their after-graduation financial commitment will not be overly onerous – it will simply be a result of paying what they can afford.

There are those who will argue that education is an investment, one for which a person must be willing to pay and sacrifice. However, what gets lost in that argument is that investing in education is not a venture that will only reap dividends for the individual, but that also has residual benefits for the community around the person and the country as a whole. We all benefit from a well-educated populace that’s capable of critical thought and intelligent discourse. And while those benefits are not specifically the domain of colleges and universities, they are concepts and ideas that are afforded the room to flourish in the proper environment.

Society as a whole benefits from education. As such, we should therefore bear some of the burden in subsidizing education for all Canadians who show the talent, intelligence, and inclination to pursue it. In the end, by instituting an income-contingent loan repayment program we allow ourselves the opportunity to reap the rewards from our initial investment, while assuming a low default risk due to the fact that the repayment schedule is not overly onerous and a deterrent to prospective students.

In the end, that’s where the smart money lies – it’s just up to the government to make it reality.